Salinas Holds His Breath; Will Treaty Be Put on Hold? : Free trade: Bush's political concerns may hobble the Mexican president's reforms.

Raymundo Riva Palacio is an editor at El Financiero, a Mexico City newspaper, and a Nieman Fellow at Harvard.

President Bush will meet President Carlos Salinas de Gortari this weekend at Camp David, and the talk in Washington is that completion of a free-trade agreement will have to be postponed until 1993--after next year's U.S. presidential election. If that's the case, the Salinas administration will be headed for its most serious setback.

The invitation to Salinas was unexpected and unsettling to Mexican officials. Reportedly, Bush hasn't made up his mind on what strategy he should follow and wants to hear what Salinas has to say.

A U.S-imposed delay in the process would not reverse the economic reforms Salinas has embarked on, but it would pose serious obstacles for his reform agenda. In 1993, Salinas will enter the downhill side of the presidency's six-year term, traditionally not a time for bold initiatives. It will be even more difficult for this president, whose party was seriously challenged in his 1988 election, to maintain the political momentum necessary to achieve the reforms he has planned.

Wisely, the Salinas administration has allowed the domestic debate to take a misleading course that obscures the real intent of seeking free trade. Largely seized by ideological concerns, the discussion has been focused on whether the Mexican economy should be integrated into the American. In fact, the Mexican economy is already integrated into the U.S. economy: More than 80% of Mexico's exports go to the American market; about 19% of its imports are American; three-quarters of the foreign investment in Mexico is American, as is most of the tourism.

For the Salinas government, the point of a free-trade treaty is to regulate the bilateral trade through permanent rules and mechanisms that will foster industrial investment and technological development. The Mexican people will not see immediate results; it will take at least a decade for the effects to be noticeable, Salinas' trade minister has said.

Nevertheless, free trade has been useful to Salinas as a shield behind which he can make other, immediate large-scale changes. He embarked on fiscal reform, bank privatization, transport deregulation, laws to protect intellectual property rights, and the sale of most state enterprises, all on the justification that these changes were necessary for a free-trade agreement. He also demolished the old union structure, and recently he smashed the most sacred icon of the Mexican Revolution by opening the door for private ownership of peasant land.

Salinas' economic performance has given him the legitimacy he didn't get at the ballot boxes in the 1988 presidential election. The Mexican people are economically better off in 1991 than in 1988, and they have closed their eyes to the lack of real political reform since then. He has raised very high expectations about free trade, and a delay in the timetable would be a blow to his standing. It also could bring him problems he didn't anticipate. Can he foster further economic reforms, can he persuade potential investors that Mexico's future is reliable, without political back-up from Washington?

If free trade is postponed because of the Bush Administration's economic and political worries, the real weakness of the Salinas administration's program will be revealed: its attachment to U.S. policies. Salinas will have less room for political maneuvering and more active opposition to his policies in Congress. It will be harder for him to implement planned reforms in the petrochemical industry, or to restructure the education system. His government has yet to prove that it can manage politically; now it faces even more political strain with even less support from Washington.

If Salinas presents all of this to Bush, what will be the outcome? A surprise announcement that both will fight for completing the free-trade treaty in 1992? Or a mere gesture of damage control?

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